Repligen Corp 2026 Q3 Earnings Call

Jacob, please go ahead. Thank you, operator, and good morning, everyone.

Welcome to Repligen's 2026 third quarter earnings call. Joining me today are President and Chief Executive Officer, Olivier Loeillot, and Chief Financial Officer, Jason Garland. Earlier this morning, we issued our earnings release and supplemental presentation, which are available on the investor relations section of our website. Before we begin, please note that today's discussion will include forward-looking statements and certain non-GAAP financial measures. Actual results may differ materially from those expressed or implied by these statements due to risks and uncertainties described in today's earnings release and our SEC filings. Reconciliations of non-GAAP to GAAP measures are included in today's earnings release and supplemental materials. These adjusted financial measures should not be viewed as an alternative to GAAP measures but are intended to best reflect the performance of our ongoing operations. With that, I'll turn the call over to Olivier.

Thank you, Jacob. Good morning, everyone, and welcome to our 2026 third quarter call. We had a record quarter with $209 million of revenue. This is a significant milestone as we surpass our prior peak in the second quarter of 2022. We believe this is another proof point that the industry is poised for its next phase of growth. It also highlights the benefits of our diversified portfolio, as this was driven in part by Proteins and Chromatography. In addition, we were delighted to close the acquisition of BioLife earlier this month. This combination further expands our capabilities in the rapidly growing cell therapy end market and strengthens our long-term growth platform. We will discuss our initial observations and integration efforts in a moment.

First, we delivered $209 million of revenue in the third quarter, which represented 12.5% organic growth while expanding adjusted operating margins by 170 basis points compared to the prior year. This was an excellent result as we were lapping a very strong quarter in the prior year. Our ability to outpace market growth very significantly this quarter is a testament to our team's strong execution in a market that is still recovering. Following these strong results and incorporating the BioLife acquisition, we're increasing our 2026 guidance. Jason will provide more details. Our updated 2026 guidance includes an expected $24 million revenue contribution from BioLife for the period following deal close in our fourth quarter. This assumes BioLife annual 2026 revenue on a pro forma basis will be approximately $114 million above the midpoint of BioLife's most recent guidance.

The business is performing well, and we are very confident about delivering our deal model for 2027 and beyond. With the recent acquisition and ongoing integration, we are taking a prudent approach to our initial assumptions for the remainder of 2026. We are narrowing our organic growth outlook to 12%-13%. At the midpoint, this represents a 50 basis point increase and assumes fourth quarter growth is within the full-year range. This also means we will deliver again on our full-year commitments and outpacing markets significantly. As I reflect on our end markets, we remain encouraged by the continued improvement in the bioprocessing industry. Importantly, our funnel and order activity continue to strengthen. This is particularly true for capital equipment. Capital equipment orders increased mid-teens year-over-year and was the highest orders quarter in five years while revenue declined.

The tap has not opened as quickly as we would have expected it this year. However, we continue to see encouraging signs in our funnel and order book. We are building a backlog for 2027 and will enter next year in a better position than we did in 2026. As a result, we remain encouraged that we are seeing a gradual improvement in capital equipment demand with a notable pickup in orders for our systems. We are actively executing initiatives that will strengthen our equipment business and prepare us for the next phase of growth. This includes continued investment in innovation as well as strategic efforts designed to deepen customer engagement and support large-scale manufacturing expansion projects. One example is our integrated solution team, which is focused on addressing customer capacity expansion, such as onshoring.

Consumable demand remained outstanding with 20% growth in the quarter, while services was even stronger with greater than 20% growth. Our services team continues to execute extremely well. Year to date, our services team has increased the number of system under contract by nearly 40%, despite a muted capital equipment revenue environment. In addition to the incremental service revenue, this allows us to be closer to our customers and provide further insight into their needs. Services represented 7% of our revenue in the quarter, and we expect it to become a larger mix of our business going forward. In short, our base business remains strong, as highlighted by our 12.5% organic growth in the third quarter. Our funnel and orders suggest a continued improvement in the end market. In addition, we continue to execute our innovation strategy to drive above-market growth.

Moving to our performance by end market, biopharma revenue drove growth, while CDMOs declined on a difficult comparison. Year to date, we have seen similar trends for both customer bases. Biopharma growth was strong in all regions, as Europe returned to growth on a more favorable comparison, while year to date, biopharma growth has been driven by strength in North America and Asia-Pacific. Emerging biotech grew mid-single digits on a difficult comparison from last year. Demand trends remain healthy as year to date emerging biotech revenue has increased in the high teens. New modalities were relatively flat but grew high single digits, excluding the impact of a certain gene therapy platform. This was led by nearly 30% growth in cell therapy. In addition, gene therapy demand grew on an absolute basis and north of 25%, excluding that gene therapy headwind.

We continue to believe new modalities will be accretive to our medium-term outlook, and we're excited to expand our capabilities with the addition of BioLife. Moving to our strategy updates, I wanted to share some initial observation on our first few weeks of ownership of BioLife. I will leave you with the most important takeaway first. We are even more excited about the strategic rationale of bringing our organizations together and the value we will create for patients, customers, and shareholders. Jason and I were fortunate to spend time with our teams at BioLife sites, and I recently joined the BioLife team again in both Boston and Indianapolis to celebrate the closing. We walked away impressed by our shared culture of innovation and customer centricity. We are thrilled to expand our offerings for the cell therapy market.

Customer feedback has been very encouraging, and we have received a number of positive responses after the acquisition. After months of thoughtful planning, our combined teams are now focused on executing the integration plan and realizing the opportunities we identified ahead of closing. In fact, our teams are hosting an integration workshop in Waltham as we speak. We have already completed actions to deliver a sizable portion of our operating expense synergies. This includes capturing public company and certain leadership costs, which represent more than half of our anticipated year one synergies. As it relates to cost of goods sold, our team is already hard at work evaluating potential options to improve CryoStor's scrap rate. Finally, our commercial teams are now collaborating to achieve revenue synergies. We recently cross-trained both commercial teams. We continue to believe our offerings will benefit from BioLife's trusted customer relationship.

In addition, our Asia Pacific team has begun to explore the opportunities to increase awareness of CryoStor in the region, particularly in China. As we look ahead to 2027, we remain focused on outpacing market growth. Assuming the market is growing high single digits, and with the acquisition of BioLife, we are positioned to grow our reported top line at least 25% next year, absent a material change in foreign exchange rates. This will result in our revenue exceeding $1 billion, which represents another significant milestone for our company. Additionally, I wanted to spend some time on our Asia Pacific strategy. As Jason will discuss in more detail, we had another very strong quarter in China, with greater than 40% growth.

In China, we're advancing several strategic initiatives to strengthen our position in the market, including ongoing technology transfer with our OEM partner as we work to recapture share. Notably, China recently published its latest five-year biotech plan. The government expects the industry to grow at over 20% CAGR through 2030. This speaks to the growing activity in this country, and we remain convinced China will be the fastest-growing biopharmaceutical market in coming years. Beyond China, there are significant growth opportunities in the broader Asia Pacific region. Last week, we opened a new Repligen training and innovation center in South Korea. This underscores our commitment to a strategically important market that has become one of the world's leading hubs for biologics and CDMO manufacturing. Before I turn the call over to Jason, I'll provide some more detail on our franchise level performance.

I will note that all references to our 2026 expectations are on a reported basis. Starting with Filtration. As expected, the previously disclosed ATF headwind was most pronounced in the third quarter and resulted in an 11% decline in Filtration revenues. I note this includes a 2-point headwind from our Polymem divestiture and foreign currency. So the decline was slightly greater than we expected. This was largely timing related, with most of our systems order planned for delivery in 2027 per customer's request. We are encouraged by the hardware backlog we are building for next year. We now expect Filtration to be flat to slightly down for the year. This includes the inorganic impact from the sale of Polymem. Turning to Chromatography, revenue grew over 50%, with some help from a favorable comparison in the prior year.